Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Silicom First Quarter 2023 Results Conference Call. All participants are at present in listen-only mode.

Following management’s formal presentation, instructions will be given for the question-and-answer session.

As a reminder, this conference is being recorded.

received the all press have should by company’s now release. You

view please have Investor Investor or News not site you company’s contact of Relations in the section received X-XXX-XXX-XXXX, Global If www.silicom-usa.com. GK it, Silicom’s Web the at Relations at it team

of you now Green like please? to to Mr. like Relations. Investor would over the begin, Global I to Mr. call hand Kenny GK Green, would

Kenny Green

welcome all XXXX Thank of to you, like Operator. quarter call. I Silicom’s results to conference would first you

like your draw I’d the to obligation any conference Silicom Harbor company. contains Safe predictions, are begin, that the statements update other to These following we Before or only passes. the does and to call not attention This performance events regarding information. statement. of may assume future statements time future change projections forward-looking or as

results demand as including and NFV, substantial competition, number an that to number dependency products likelihood which or rely customers that Ukraine, pandemic, global in on rising resulting their or the volatile provide on as disruptions and interest are the Commission. cloud-based the and activity, caution other those in from events maintaining, dependency a the solutions extent from prices, protecting any and time customer effects growth other evolving a by impact continuing result the may on filed development, XXF, services, of will through economic by on markets, may the exchange the maybe discussed differ company by as support plans, from and and of in the these difficulty as commodities rates, of and for resulting Form The selectivity marketing, property, markets, short-term manufacturing, time documents rising Silicom's a adopted Annual Exchange factors Securities impact speed which protection the a Edge well limited increasingly COVID-XX and greater markets. the solutions increasing smaller well in in war our customers, intellectual subsequently with of company filed evolving revenue Silicom's larger investment materially uncertainty, which commercializing and inflation, Silicom as projected, increasing these marketing new recognition, IT to Actual rates, customers in and and to of Report customer SD-WAN, brand exercising sales with

today's and be following ongoing company's the current results, to these decisions, evaluate of Management used that core prospects are measures and performance. by assessment the and operations this of is in measures disclosure forecast the non-GAAP strategic earnings of non-GAAP to financial for company's the financial and financial Such addition, useful future. future measures believes In make management such discussed certain understanding future will company's non-GAAP non-GAAP investors' presentation measures during release, call. the

you in are measures or financial results. included operating with, Website. for to assessing not of release, a our can which for alternative measures method Unless measures be otherwise in today provided them a with stated, that to to non-GAAP investors by this Non-GAAP financials additional information GAAP in condition full are A earnings disclosed an and as today's These financial on GAAP. order assumed will Silicom's are management in call financial basis. substitute it be find discussed non-GAAP provide should reconciliation on conference accordance

who the will of President Mr. CEO; CFO. and provide us Gilad, Mr. the by overview financials. Eran, results, of today Eran with will begin line Liron With analysis the followed Eizenman, and on the are Liron an

will turn We over the to then call question-and-answer session. the

Liron, please call the like ahead. go over that, with to I would now And to Liron. hand

Liron Eizenman

would of conference quarter call, results. results discussing our to like I welcome you XXXX Thank first financial all you, Kenny. to our

first our on of last a report We quarter increase year, grew the weakest first revenues, to the quarter $XX.X year. happy are We XX% representing of to over million, start XXXX. a seasonally very the quarter great to

the Our an ongoing economic continued some all year-over-year shortages is of cases, a against challenging component more uncertain more growth in environment. impressive the and (ph) environment, with [foreground]

the allowed leverage operating within For operating our operating by strong million, demonstrated profit into the Silicom, accelerated at translate growth by XX% the revenue model improved we business margins earnings in to first versus $X.X to $X.XX reported share to income continued the growth, up XX.X% highlighted led per to share. last XX% success profitability, diluted uninterrupted first XXrd of XX.X% per of our quarter quarter in The quarter year. this year-over-year, quarter and and

the emphasizes markets, the across our interest quarter all broad our Our Edge success continued product. robust target and in for especially

cultivated showcases on unparalleled of we built that over delivery, market's many high-performance support is rapid at and distinct recognition the have Silicom It years. our proposition customization, offering, the It dependable value capabilities.

and market achievements the Our our underscore solutions. clear for innovative demand product

with our debt. no we balance improve strength, above Looking stands sheet currently cash at continue position, to our million $XX which

enables position new our capital strategic to capitalize our to us share allows and In customers shareholders. and with it of today's provide customers. Our serve especially, advantage, competitive Furthermore, to and key continued opportunities. sufficient profitability generation us a enabling on strong better working is asset significant cash market the us cash with it reward our quickly a attract

authorized Board million in allowing the shares to of new In Silicom of share the of worth plan, $XX a ordinary one-year our light up to this, market. purchase today, repurchase Directors

successful have continue design efforts which in grow. impressive Our of wins sales resulted to quarters in recent roster an

Edge market SASE, announced wins, And new primary design for our of quarter, and estimate underlines the this communication During SD-WAN, highlighting unified our engine total our growing cases. use today. units products, Edge we growth the addressable

a a XXX our its announced presence. of of product SD-WAN selected Fortune from with Edge a global High-Runner They flexible one unique vendor, connectivity. win Networking customized the and leading version design new company XG-integrated features we January, for In

Edge later, Compute with boards. we a see selection a customer, family. provider this search customized our is February, potential leader, our product of design process, Edge unified Our few growth an extensive proposition a win in one solution SD-WAN point weeks new and another leading negotiation by significant announced communication value confirms for and after of A proof the our we in

the customer's The six high-growth This innovative with later be win million period with service the top The advanced vendor. a Networking products including for network delivered. our market the support Edge significant edge $X.X February, deployment win during we been with totaling will design our And functionality, integrated for product, order be during in SASE board already providing virtual XXXX. secure placed will of second initial access platform, delivered months. was a of some first-half the edit them have to functions. uCPE Order in into date, secured new

that Those into Networking Edge support has our the to collaborating areas. use are with momentum customer Edge customers expand with and on them we potential seeking to is next enhanced the additional recent And generation wireless for from in performance well our that wins broadening business the additional grow beyond networking a interest growing now further flexibility SD-WAN and solution which networks. with demonstrate cases, space,

types just also of value points, customization Our telcos, all shares, with networking service and our unique portfolio more. for capabilities, relationship solution is price attractive the as including exceptional offerings, Edge Intel vendors, compelling market proposition, broadest but as not of close providers, well working

acceleration this X networking on we increase see and partner as as server advanced Edge internal led and wins our few lines success this for the an an ago Edge sector, strong us security us tier for seen weeks play the growth. in in as product two NIC card overall recently, continue of accelerating design vendor position offload [indiscernible] our Silicom's important months More market. expectations a the SmartNIC, is have to potential momentum U.S.-based awards mentioned, that FPGA to in demonstrating an Silicom. key I role adaptors in cyber go-to we our the market well NIC based traditional As recent has This technology

applications secure products be networks organizations. next Our of for generation optimize helping some largest solutions are the [indiscernible] the into which world’s customer’s will and customers, and integrated

Our customer the in starting first year to in ramp-up plan is next with of XXXX. deployment second-half XXXX deployment

Our with of world’s across roster the attest the innovation the of wins our leading design board. technology vendors impressive to

addresses and lines of package, product as driving go-to growth. in Our diverse emphases reputation the our strategy product traditional a source and that the offering customer’s needs, relevance broad for unique of range our our of solution, performance-enhancing portfolio, our our [indiscernible] ongoing full-service critical

it some of with working provide our which as advanced pipeline move at wins wins and on promise could growth we color the years. some potential at highlight potential discussion, on. stages wins are design and solid exceptionally To broad. significant XXXX, design remains revenue some accelerate through in Looking the coming can see we we the the of our of Today,

as our X few is innovative tier of the a our considering developing an leader cyber developed feature-rich of and First, product line. use of products that expansion we security continue

those capabilities increase competitiveness those one of as core well-positioned other that customer. products customers. for in believe Furthermore, this win world our and further only we to develop with will competencies products the with We are additional us business the enable vendors to and advanced

vendor Second, a their prominent platform. our product Edge generation adopting in interested next is as SDX SDX

in case, [indiscernible]. is to will utilizing new Edge low-end a enable new CPE Third, which customers our interested reducing provider their features and a deliver service use them for to

projects activities will deployments end those of towards and a coming begin and in in While months, require testing more design XXXX. the of we XXXX still expect few the the

roster wins. them always to and on design was built adding wining more more strategy growth and Our design growing wins our of

cementing increase our above we how and that today as is pipeline us. our lay All wins. This positioned and our potential position design of remains And just the be an industry. ahead to future projects further quality industry about of key market in excited all, a are increasingly The share as examples of we our opportunities player Silicom healthy leader. in revenue continue

the terms projected revenue between $XX XXXX $XX of second quarter, of second our for million quarter and we million. the for range will guidance In

of to over range this mindful are the the a XXXX environment from at we of possible first-half midpoint the very a outlook, of global for XX% solid digit macroeconomic year-over-year growth the pleased growth which are second revenue year-over-year we and XXXX. guidance and represents While market weaker of headwinds double quarter provide

start In at with report bottom the increased solid line. summary, we with growth revenue a year-over-year are to very strong XXXX happy growth to

Our and capabilities. from performance value market built target showcases proposition success markets including unique delivery, appreciation our our high is our products, interest and and of the reliable significant diverse on support exceptional offerings, for innovative Edge particularly

existing speculated and solutions new for phase. interest The many expectations the growth. up in and ramp for is larger from top wins of market that We tier than we roster customers underlines Edge and initial impressive our networking exceptionally the for product our addressable the design indicate are an customers long-term total which solid our of maintain latest initially

design us. for of potential accelerated Additionally, future bodes our robust wins growth significance and pipeline further

ahead. go will review I of call that, hand quarter the Eran, now With detail over a for the please Eran results. to

Eran Gilad

and quarter Revenues first Liron, as $XX.X million, with year. the compared up everyone. you, for $XX.X hello XXXX Thank XX% of in first the quarter revenues were million of reported last

over were X%. Our Israel geographical of East and months America breakdown the North Europe the follows: as XX%, and XX revenue world XX%, rest last Far

During the of the to our about the for compensation the granted RSUs last results and XX accounted together plus which on excludes customers of related be and I acquisition respect a expenses non-cash customer income. non-GAAP months, in revenue. XX% rest will lease as top liabilities presenting employees, had Directors, well and basis, financial as financial Officers one adjustments of options we three XX% our

quarter XX.X% and million, full sold of a of non-GAAP margin XX% $XX.X today. please of million, mix refer is our of in the and release the and to to of The gross expected earlier in the gross function product For guidance we quarter to the Gross margin first issued range remains from between $XX.X first gross variance profit XXXX. the of of numbers, in margin XX% compared in with press gross a line for margin gross profit XX%. or the XXXX representing was reconciliation quarter the specific GAAP of

XXXX. million to first XXXX. of first Operating increase quarter were the of Operating $X.X quarter income income first $X.X year-over-year reported of of in Earnings of below of quarter XX% expenses for of first year. $X.X in compared XXXX. for compared $X.X This with XXXX operating Net first an as $X the $X.XX, the the diluted is reported the in the EPS income compared million were quarter in share $X.XX. to a was last in the of the an was million, million of XXXX quarter quarter $X.X XX% quarter million, of of increase million, per quarter increase in XX% reported first

outstanding million Now, with marketable of summary. share. turning balance to $X.XX That the $XX.X as March cash XXXX, no the company's or sheet, ends XX per totaled debt, equivalents securities cash, and my

back for would to session. to operator Operator? I over like hand the question-and-answer

Operator

Instructions] from Henderson will and of first begin at this you. Company. is Needham session. Please [Operator we time question The & the question-and-answer go gentlemen, Thank Ladies Alex ahead.

Alex Henderson

environment. that's companies your of predictability are on other that print. you their the out it but a impressive. not comes gear sub-assembly that for have hoping for the generally about of the numbers, struggling systems, dicier thanks, congratulations Edge, a that companies momentum pretty in a in conditions which The to Great, components There's was could the side backlog. good and to case order little to been little numbers when number a people it's you the their and make guys, and the talk backlog I bit the challenging are on are obviously have of solid systems that's that obviously obviously or bit on-prem rarely is there, sustain double extent customer coin,

the their providers have poor a managing inventory. in of service track of particular record Some

little talk bit I backlog business which So, see and provisions, here, on little described about have of a some you it? the than of think just degree bit some different guys. the can I Thanks. orders you non-cancelable please? you bit to of a Could as you being to a may guys the your the visibility Edge visibility than systems that, some about better have talk

Liron Eizenman

Sure.

that and all, customers we as that you're such for are with their with and way we double-booking right, or our understand And not And QX plans inventory warm based forward. we is to orders that orders. their in have it's believe not to risk lot on general, going the get. So, we thank to when provided, do business of first a situation orders expect are indeed, talking we words. looking our a conduct and orders you of the are that cancelable, the that, And those positions the obviously the in at guidance we we we're

see So, And we -- number. your we don't summary general, as huge with that risk that a have see now. to that feel in comfortable with backlog we we maybe the right question,

Alex Henderson

and want consistent back-half talk the going moving don't you little I the visibility point, the how year? know into is second-half you back-half the you it a to about should back-half? we but the the into then normal this guidance have bit trends? visible is at do offer into it with of Can about for year, of How think

Liron Eizenman

ahead, Currently, always Traditionally, we not do we're for guidance doing the of second-half same provide the year. we give now. and one the quarter

to much have on that don't now. we right So, add

Alex Henderson

been Okay. you And hedged little about weak against result of a obviously, turmoil. you're bit like? has and then The hedging, forward-looking, a the what extent political could to quite shekel, as approach talk your

Eran Gilad

was The quarter. was quite numbers. effect, marginal effect shekel it's the It the dollar a of minor or positive this but very

Liron Eizenman

it, and Just adding against to we've hedging. never that, And done hedging shekel. we're we're not not

Alex Henderson

Perfect. Thanks.

Operator

at are questions Instructions] this There no time. [Operator further

with be ahead like by remind a replay to www.silicom-USA.com. available, closing of will participants Web that on to this Mr. statement, Eizenman site, ask Silicom's go call I his would tomorrow, Before I

make Mr. Eizenman, would your like you concluding to statement?

Liron Eizenman

in Thank your and Operator. next you, look call in on day. to joining call We everybody, Thank for Silicom. you, three hosting for months' the you Good time. forward our interest

Operator

Thank participation. Thank concludes Quarter your XXXX Results you Silicom's for First you. Call. Conference This

You may ahead go disconnect. and

Silicom (SILC) 1 May 232023 Q1 Earnings call transcript